Material management affects Oil & Gas facilities more than we can imagine. From finding the correct spare at the right time to optimizing inventory costs, material management has far-reaching benefits. While there are different methods and approaches to material management, here are some insights gathered from our material management experience for nearly five decades.

1. Develop processes and procedures :

Everything needs a plan, and a good plan comprises well-defined processes and procedures. Leave nothing to the imagination. Develop detailed, end-to-end processes and techniques along with clear stakeholdership. This will ensure that everyone is on the same page and working in the same direction.

2. Follow standards:

There are well-established standards and guidelines for coding, cataloging, data cleansing, and enrichment. Follow these standards as much as possible to eliminate redundancy at large and make things efficient end-to-end.

3. Get your BOM, SPIR/SPIL right:

Your BOMs/SPIRs/SPILs are like a compass; they have to be accurate at all times. Bill of Materials and Spare Parts Interchangeability Records/Lists act as the blueprints of material management. Without updated and accurate blueprints,  following the best processes and procedures will yield no results. It is common to see Oil & Gas facilities functioning with outdated BOMs, leading to poor inventory management.

4. Eradicate duplicates:

It is common to see inventory worth millions of dollars in the form of duplicates. Such discrepancies in material data lead to high procurement costs and inefficient utilization of inventory space. If you haven’t done so already, eradicating duplicates can be a good starting point for improving material management.

5. Define stock requirement:

How do you decide min/max levels for your stock items? The best way is to map the supply and demand patterns and determine the optimum stock levels. This is a periodic activity and should be carried out at regular intervals. Often, old demand and supply data is used to make stocking decisions, and the actual requirements could be drastically different.

6. Identify non-moving inventory:

Non-moving inventory occupies valuable inventory space. At the same time, non-moving inventory also represents locked capital, which can be freed up and utilized to ease the cash flow. Identifying non-moving inventory and its strategic disposal can immediately improve material management.

7. Manage Surplus:

Over-procuring, order cancellation, non-standardization of spares, blocked inventory, and change of orders leads to the generation of surplus. If not dealt with, this surplus can accumulate over time and become a huge liability. Therefore, monitoring and managing surplus periodically is a must for a lean inventory.